The first quarter of 2025 was filled with the refinement of old theories in the property and casualty space. In the total loss vehicle space, countless cases have challenged the methodology of insurers' valuation processes. But this quarter, a court considered a specific challenge to the use of a federal tax credit in determining a vehicle's value. For years, insurers have moved to enforce appraisal provisions to resolve valuation disputes, with varying levels of success. This quarter, the U.S. Court of Appeals for the Second Circuit placed significant constraints on the time for seeking appraisal.
The labor depreciation cases - another well-trodden theory - saw a new challenge that seeks to prevent an insurer from depreciating materials for repair claims. A district court dismissed a case at the pleading stage, and that case has since been appealed to the Sixth Circuit.
Prior quarterly updates reported on a theory challenging the use of a 'new construction' setting in Xactimate, a software used to value property claims. This quarter, one court has rejected that theory in a summary judgment motion.
Lastly, a trio of new data cases that challenge insurers' collection and use of insureds' driving history cropped up this quarter.
Total Loss Vehicle Cases: New Theories and Rulings on Appraisal
In the personal automobile insurance space in recent years, insurers have faced two main types of cases: (1) how insurers value vehicles, i.e., the third-party valuation provider, such as CCC Information Services, Mitchell and Audatex, and (2) what is included in the settlement, e.g., sales tax, titling fees, and registration fees.
On March 10, in Katz v. Esurance Prop. & Cas. Ins. Co., the U.S. District Court for the Eastern District of New York considered a motion to dismiss the second type of case - an alleged improper failure to pay sales tax for a leased vehicle.1 In a report and recommendation, the magistrate recommended dismissal of the bad faith, deceptive acts, conversion and negligence claims as duplicative of the breach of contract claim.2 The court also considered and denied a motion to strike the class allegations, finding the motion premature and pertaining to issues to be decided upon a motion for class certification.3
In another total loss valuation case - Milligan v. GEICO Gen. Ins. Co. - the Second Circuit on March 13 issued an important decision on the time constraints for demanding appraisal.4 Many insurance policies contain appraisal provisions that allow the insurer or the insured to submit to third-party appraisers disputes over the value of loss. Insurers frequently seek appraisal to resolve putative class actions in the early stages. In the Milligan policy, and as in many other policies, the appraisal provision contained a requirement that appraisal be demanded 'within 60 days after proof of loss is filed.'5 The Milligan plaintiff sought to avoid appraisal by arguing that the insurer's request was untimely, as it came more than 60 days after the insurer was notified of the loss.6 The insurer disputed this interpretation and instead argued that the triggering date for the 60-day period was the date a dispute arose over the settlement amount.7 The Second Circuit rejected the insurer's interpretation and affirmed the district court's denial of the motion to compel appraisal.8 Since it's pretty common for valuation disputes to arise more than 60 days after the notification of loss, the Milligan decision may prove to be a barrier to future appraisal motions.
A Couple of Notable Wins for Insurers in Labor Depreciation Cases
For years, insurers...
